Copper Trades At Top of 60-Year Price Channel

Copper is off its all-time highs but it still trades at the top of its long-term price channel. Since 1946 copper has been on a long-term upside punctuated by steep short-term upsides and sharp price corrections. Currently copper is on a very steep upside which began in 2002. The chart of annual copper prices shows the price bubble.

To better see the trend of long-term copper prices I transformed the annual prices to their logarithmic values and plotted them. Here the price bubble is muted so the long-term price price trend is more evident.

The log-scale price chart shows copper trading near the top of its long-term price channel. Often when prices move above the upper boundary of a price channel, they decline to within the body of the channel.

Predicting the future copper prices is a tough call but in all likelihood they will retreat back into the body of their long-term channel. Therefore, beware of the stocks of copper mining companies like Phelps Dodge (PD). They could quickly head to the downside. Of course, if demand for copper remains strong, prices could continue to rise and copper mining stocks would rise in price.

Posted September 10, 2006